FTSE 100 preview: Footsie to rise, GDP due

Britain's top share index is seen opening modestly higher on Friday after two sessions of strong gains, with overnight advances on Wall Street and in Asia tempered by caution ahead of the first reading for British Q2 GDP and the outcome of European bank stress tests.

Market action: How will GDP figures affect the market?

According to financial bookmakers, the FTSE 100 index will open between 1 and 10 points higher.

The UK blue chip index closed up 99.17 points, or 1.9% yesterday at 5,313.81, ending above 5,300 for the first time since May 18, the day before Germany introduced a short-selling ban at the height of the euro-zone sovereign debt crisis.

The gain took a two-day rally by the UK index to 3.3% after it snapped a five-session losing streak on Wednesday.

Banks will be a focus in London on Friday as investors await the outcome of an examination by regulators of the financial strength of banks across Europe, although the results are not due until after the market's close at 16:00.

British second-quarter GDP forecasts, to be unveiled at 08:30, are expected to show growth of 0.6 percent on the quarter and 1.1% year-on-year, an improvement on the final Q1 readings of up 0.3% quarterly, and down 0.2% on an annualised basis.

US blue chips gained 2% yesterday as investors shed some of their fears about the strength of the recovery following better than expected existing homes sales data, and with strong earnings from economic bellwethers 3M, UPS and Caterpillar.

The parade of prominent names reporting profits continued after the U.S market's close. Microsoft Corp reported a 48 percent rise in quarterly profit late on Thursday.

In regular trading, Microsoft shares rose 2.9%, but they were down 0.2% after hours.

No important U.S. economic data will be released on Friday, and the flow of US corporate earnings slows slightly, with results from restaurant group Macdonalds and telecoms firm Verizon the main features.

Asian stocks were stronger on Friday, with Japan's Nikkei looking poised to snap a 5-day losing streak, rising 2.6% on US earnings, short-covering and a weaker yen.

On a technical viewpoint, Raghee Horner, Autochartist's chief market analyst said Thursday's rally brought the FTSE 100 index close to the top of the range between the June 21 high at 5,331.45 and 5,341.41, the high from May 18, and these two highs represents a likely reversal area.

'The Stochastic indicator has reached an overbought level, and in a range such as the one within which the daily chart is trading, this is a signal that prices are reaching either a stall or reversal ceiling,' said Horner.

UK stocks to watch today are:

Tropical Storm Bonnie has threatened efforts to plug BP's Gulf of Mexico oil leak on Friday and officials said many of the vessels and rigs involved in the operation would prepare to move out of the system's path.

Also, BP has received approval to prepare to help plug its Gulf of Mexico oil leak with a 'static kill' in tandem with a relief well, but final approval is yet to come, a BP executive said on Thursday.

Vodafone issues a trading update.

The British telecommunications provider has asked its auditor to change members of its credit team after optimistic profit assumptions led to a £1.6bn writedown, The Financial Times said on Friday.

Standard Life Investments, a 2.9% shareholder in Tomkins has said it was disappointed by the board agreeing to open its books to the consortium of Onex Corp and the Canada Pension Plan Investment Board, and urged the UK car parts maker to reject the 325p cash offer approach.

United Utilities issues a trading update and holds its AGM.

The insurance firm Beazley Group posts first-half results.

The soft drinks group Britvic issues a trading update.

The specialist banking firm Close Brothers Group issues a trading update.